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Quiz 3 solution

# Quiz 3 solution - Name I Explain why the taxpayer in each...

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Unformatted text preview: Name: I. Explain why the taxpayer in each of the following situations either does or does not have taxable income and 594.0770“) determine the amount, if any, that the taxpayer would have to recognize, (y a. Fernando works as a salesman of Dallas Cars Inc. Because Fernando is the year's top salesman, Dallas Cars allows Fernando to purchase a car for \$30,000, which normally sells for \$40,000 (Dallas Car's cost was \$28,000). TM“ is coH’Mﬂ’ng ’ ./&/-rt—ﬁrk_— /‘/‘; Fig U’gﬂgu 2/775 ﬁts/w“- ﬂ—_"'—-_-—-- fﬂcal‘fl' 7-=- FatNWD" ..-—-—-—-“ Janine's brother Barry is laid off from his job for the ﬁrst half of the year. Because Barry is having trouble paying all of his bills, Janine tells Barry that she will help him out and pay the property taxes on Barry's house. The property taxes amount to \$800. Jaw-k? "/5‘3": SL9 A!“ ___J.—-—-—"" 77-“45 1.5 ﬂ élf-T: M— xﬁcveF‘ra Igﬁ’f-I‘Y -0— ﬂ Thomas works as a production manager for Wabash Machinery, Inc. Because Thomas‘s unit had not had a work related accident for 2 years, Wabash Machinery gives Thomas a check for \$600. C #5}, Awﬂ-fiﬂ—C #1:! I //\/C0M r; 7}»445 Emmett was out for his daily walk when he spots an old shirt on the side of the road. Upon inspection, he determines it to be an old baseball uniform, which is in good enough condition that he takes it home and washes it. Emmett takes the shirt down to the local collector's shop where he learns that the shirt was once worn by Willie Mays and is worth at least \$5 000. 3 ’- E ) ﬂ 0 7714.: Is INC-HE) ﬁur 77km I B apn‘. (1.;— 55745 55""7" r2: " .r‘-_-—-—-- .__-—--'—"_" Amber wins \$25,000 in the state lottery from a ticket given to her by her cousin, Beverly. . 4: I...) I" 67" ,2 sew-1.1 14—1177: ’4 Nam“ —————— 1. faLﬂWa") . Jenny, who is single, owns 40% of the Sherwood Partnership. During the current year, Sherwood has the I following results: Sales \$380,000 E Long—term capital gain 20,000 Operating expenses 280,000 ( :9 3. Jenny withdraws \$30,000 from the partnership. In addition, Jenny has a \$30,000 long-termeapital loss from the sale of an investment. What is Jenny’s gross income a .- L99“ from this information? [1/ E C 3 9531'” ; 5H '— ‘— ﬂq‘ﬂTﬂJEﬂfﬁ’V’a ‘9‘“ ’yggo: a)! Iﬁ‘ﬁ’ﬂM—q W 4 a )1. 5 ’Wr I 5 in? E g . . l \- \k :5 Cir/17?:— G'ﬁ’”) Ea“ /#rpo¢sﬁi‘ (39,”) “’ “’5 6—276“) <3 a > p :1“ LT 1—245 1 "’ 1—1»: :7— M 4"“c'” V‘W’ ﬂ; 2:— -———-— TALZ' cm f/‘Zawa LTz—as) (5 Cﬁf-r’ua “PUBL- z ( a.) b. Assume that in the next year, Sherwood Publishing has \$80,000 of ordinary income, Jenny has a \$24,000 short-term capital gain and taxable income from other sources of _ . . 9 \$20,000. What 13 her adjusted gross income. 5: db ‘5 ‘2 a) Go a ﬁfM 977*“ l (-q /A/¢v/IE f 3 2 “'3 2%:fmwrﬁr/f 1PM“: 627519" ‘7”) J {91" 9.55"” éﬂv‘) 57* > M 1m— 4 " é: Albuq- r’l—fﬁ-ﬂ" 1:0.“ 12";5 £4914 ‘6'}... {ﬁr—.4 l J W I Mgr}.- fh‘v "I. D I /__’___/_———4_— Name: 5a Lu ,7 [HQ ’ 0 Determine the amount of gross income the taxpayer must report in each of the following situations. Explain why the amount is taxable and how you determined the taxable amount. (I) a. Randolph purchased an annuity costing \$13,000 that will pay him \$200 per month for life upon reaching age 65. In 2009, when his life expectancy is 14 years, Randolph turns 65 and begins receiving the annuity payments. In 2009, Randolph receives \$1,200 (6 payments) from the annuity. y" _ . £¢.os.5 AWFT—J 0'1" i - i AIL-pysz t E WLUJID‘J‘ \$3.3»? 72:7»...C-sr ’1‘, (Was-3-1) .39 a M, /4y/tre:r-IJ"\$" Irv L! (a 5 “ﬂ!- 1 /79 Why an: ail—u spa» 7“ 16,1 W. 19—695“ (7-7,;ng 7'7 [agar (g) b. - Fargo Systems Corporation, an accrual asis taxpayer, leases computer time on its mainframe computer. In November 2009, Fargo enters into a two—year lease with Bismarck Processing, Inc. The lease agreement requires Bismarck to pay a \$4,800 ﬁxed fee when the lease is signed and \$100 per hour of mainframe use, paid on a monthly basis. Fargo receives the \$4,800 payment on November 1, 2009. Bismarck pays Fargo \$800 on December 15, 2009 for November computer use and \$1,200 on January 18, 2010 for December computer use. 89 3— an M— v E" '5 '9’“ ﬁrm 5‘ 1, .1. a a 251% 23:» 54% 3 ﬂkT/m PF &.-)‘¢"”° J'ng 66 a 4,3» 11.9.4: awe/m X ’- 72:, 4:» l l l (y) c. Maria, a single taxpayer, is retired. During the current year she receives \$19,000 from her ‘ employer‘s qualified pension plan, \$1,000 in interest on a savings account, \$30,000 in 1 interest on tax-exempt municipal bonds, and \$10,000 in Social Security beneﬁts. ‘ l | 1 e /7azn=/£22 x41>~roﬂfﬂ ém;/~d=-HE W 4‘ 3 ° ‘3 mm- raw raw-r ————"‘”7_ 1 £2.21, Wvé—mag :«aLe—smv ‘ "‘ )4?” \$- /900- K.?‘.>ﬁ :___ . . ﬁn.- (295° : 3.5115655}... 34,...) 4 a. 2.9755“ g - J alas \$35 52\$ , TWM or 6H7»qu 5" a) d. Stuart works for Prairie Surveyors of Kansas. During the current year, Prairie Surveyors replaces all of its computer equipment. Stuart makes a deal with his boss to purchase one of the old computers for \$200. Prairie Surveyors received a \$1,000 trade-in allowance on the 5 other computers it replaced. ﬂﬂ—AGA—HO ﬂVﬂﬂche—z abuts}: ' F191! DP aawum‘ 9 //WF ﬂit—ii; #__.l__o._-— ‘r 2‘5"” ! WWI/MW“ 57—- ...
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Quiz 3 solution - Name I Explain why the taxpayer in each...

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